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M&S and Next battle to try on Victoria’s Secret’s UK arm | Business News

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Marks & Spencer (M&S) and Next, Britain’s two best-known clothing retailers, are vying to take control of the British operations of Victoria’s Secret, the lingerie brand.

Sky News has learnt that the two high street giants are among the parties interested in becoming Victoria’s Secret’s parent company’s new UK franchise partner.

Marks and Spencer
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M&S already controls 27% of the UK lingerie market

At least one other unnamed party is also understood to have expressed an interest in a deal with Deloitte, which was appointed as the chain’s administrator earlier this month.

News of the talks has emerged on the same day that Victoria’s Secret is reopening roughly a third of its 25 UK shops following the three-month coronavirus lockdown.

Industry sources said that any bidder wanting to franchise the Victoria’s Secret brand in the UK and retain a physical footprint would seek fundamentally restructured rental terms from any ongoing stores.

The Victoria’s Secret shops which reopen on Friday are said to have struck revised rent deals with their landlords.

The interest from M&S and Next effectively sparks a bidding battle between the two most prominent clothing retailers in Britain.

M&S’s involvement is likely to be of particular interest to retail analysts.

Next
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Analysts suggested that Next was a more likely franchisee for the Victoria’s Secret brand

At its recent full-year results, the company said it would open its digital platform and largest stores “to complementary guest brands to broaden appeal and increase online growth”.

M&S already controls 27% of the UK lingerie market, with 36% of the market for bras, so it is unclear whether any franchise deal could attract interest from competition watchdogs.

Analysts suggested that Next was a more likely franchisee for the Victoria’s Secret brand, owing to its success selling third-party products from the likes of Abercrombie & Fitch, Boss and Under Armour.

The sale process, which is at an early stage, was triggered last month when one of the world’s most prominent women’s underwear groups announced that its UK arm was pursuing a ‘light touch’ administration – a process that allows its existing management to remain in control of the business while offering protection from creditors.

The insolvency only affects the UK operations, and has no impact on its presence in the US or other markets.

Victoria’s Secret’s parent company, L Brands, had been in discussions about being taken over by Sycamore Partners, a private equity firm, before the talks were abandoned last month.

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Despite its profile, Victoria’s Secret has struggled financially in the UK, making an operating loss of £170m in the year to 20 February.

Uncertainty over the future of its UK outlets underlines the broader trend in British retailing, which has seen vast numbers of chains refusing to pay their full rent bills for the third quarter, with footfall and sales at a fraction of the usual levels because of the coronavirus outbreak.

Analysts believe that the pandemic has accelerated a structural shift across the industry, with clothing retailers such as Cath Kidston, Debenhams, Laura Ashley and Monsoon Accessorize among those to fall into administration since March.

Some have emerged to resume trading, but with drastically reduced physical footprints.

At the time of Deloitte’s appointment as administrator, Rob Harding, a partner at the firm, said: “This is yet another blow to the UK high street and a further example of the impact the COVID-19 pandemic is having on the entire retail industry.

“The effect of the lockdowns, combined with broader challenges facing bricks and mortar retailers, has resulted in a funding requirement for this business, resulting in today’s administration.”

M&S and Next declined to comment, while a spokesman for Victoria’s Secret UK said: “We continue to work closely with Deloitte to review a range of possible outcomes.”

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